Mansion tax plans crude: Mandelson

Ed Miliband’s plan for a mansion tax on homes worth more than £2 million is “crude” and would end up “clobbering” people, Labour grandee Lord Mandelson has warned.

In an outspoken attack on the flagship policy, which Labour hopes will help pay for investment in the NHS, Lord Mandelson said it was a “short-termist” move.

To add further insult to Mr Miliband and shadow chancellor Ed Balls, the former Cabinet minister said he preferred the policy drawn up by the Liberal Democrats to rake in more tax from high-value homes.

Labour’s mansion tax would raise £1.2 billion a year through a levy on homes worth more than £2 million.

People living in homes worth between £2 million and £3 million would pay an extra £250 a month in tax, with the money contributing to Labour’s promised £2.5 billion NHS “Time to Care Fund”, with other bands for more expensive properties.

The Liberal Democrat plan, backed by Lord Mandelson, would involve a series of extra bands of taxation for properties worth more than £2 million on top of council tax.

In an interview with BBC2’s Newsnight Lord Mandelson, one of the architects of New Labour, acknowledged: ” We don’t have an efficient way of taxing property in Britain.”

But he added: “I don’t happen to think the mansion tax is the right policy response to that, I think it’s crude, I think it’s short-termist, what we need is what I think the Liberal Democrats are proposing and that is the introduction of further bands that relate to different values of property within the council tax system, that’s what I would like to see, it will take longer to introduce, that’s true, but it will be more effective and efficient in the long term than just sort of clobbering people with a rather sort of crude short-term mansion tax.”

Critics of the plan have warned that it will disproportionately hit people living in London and the South East, where property values are much higher than elsewhere in the country.

Labour estimates the tax will apply to fewer than 0.5% of the homes in the country, with people earning less than £42,000 able to defer paying the charge until their property changes hands in an effort to protect people, especially in the capital, who have seen the value of their house soar in recent years.

Lord Mandelson said: “You do need a fair, progressive taxation system where people who are earning the most and accumulating the most wealth pay the most.

“And for very many people they shouldn’t pay anything at all, because they simply don’t have the incomes, or the wealth, or the assets, to support that. ”

The former business secretary said he was not worried about the message being sent out by the mansion tax, but he added: “I want policy effectiveness, I want efficiency.

“I think people are entitled to expect thought-through, sophisticated responses to serious problems.”

He told Newsnight: “We have to make sure that what we are doing is, in a sense, recreating the policies that we saw in the Clinton-Blair era, where we saw a pro-business, liberal economic approach but combined with very strong policies and interventions by government in order to create opportunities for individuals and to redistribute income and wealth more fairly.”

A Labour Party spokeswoman said: “The mansion tax will help fund a Time To Care Fund to pay for 20,000 more nurses, 8,000 more GPs, 5,000 more home care workers and 3,000 more midwives.

“When working people have seen their wages fall by £1,600 a year since 2010 it is right to ask those who have the most to make a bigger contribution.”